Capital Acquisitions Tax (CAT) is also known as Inheritance Tax in Ireland or also Gift Tax.
This is a tax that is charged on money or property that is gifted to, or inherited by someone.
This tax applies to all property that is located in Ireland.
CAT also applies where the property is not located in Ireland but either the person giving the benefit or the person receiving it are resident or ordinarily resident in Ireland for tax purposes.
The current rate (2019) of inheritance tax or CAT in Ireland is 33% – (it has been this since Dec 2012) .
Inheritances or gifts under certain thresholds are tax free. There are 3 different threshold levels (groups) depending on the relationship between the recipient and the donor (disponer) of the gift or inheritance.
The group thresholds were increased in Budget 2019 – the threshold levels below are valid from October 10th 2018 onwards .
Group A : the tax free threshold is €320,000 (increased from €310,000 in Budget 2019 ), This applies where the beneficiary is a
- child (including adopted child, stepchild and certain foster children) or
- minor child of a deceased child of the disponer (donor).
- Parents also fall within this threshold where they take an absolute inheritance (full and complete ownership) from a child.(not a gift) and the (II) the inheritance is taken on the death of the child. Otherwise parents fall in to Cat B.
Group B: tax free threshold is €32,500. This applies where the beneficiary is a …
- brother, sister,
- nephew, a niece or
- lineal ancestor or lineal descendant of the disponer (eg grandchild).
Group C : tax free threshold is €16,250 and it applies in all other cases.
Example 1 : A son inherits a house valued at €400,000 from a parent. This is €80,000 over the Group A threshold (€320,000) – so the tax bill would be 33% of €80,000 which is €26,400
Example 2 : Two children inherit a house worth €800,000 .
The total inheritance tax threshold for both children is €320,000 times two ( €640,000). With 33% tax on the remaining €160,000 house value, this would result in an inheritance tax bill of €52,800 in total or €26,400 per child.
Example 3 : A nephew inherits a house worth €200,00. The tax free threshold (Group B) is just €32,500 – so inheritance tax will be 33% of €167,500 – which will be €55,275
Inheritance tax can sometimes result in relatives who inherit property having to sell the property to pay the inheritance tax.
- All Gifts or inheritances from a spouse or civil partner are exempt from this tax .
- Since 25 December 2016. – you are exempt from inheritance Tax (CAT) on a house you inherit if all the following apply:
- the house was the only or main home of the person who died
- you lived in the house as your main home for the three years before the person’s death
- you do not own, have an interest or a share in any other house, including one you acquired as part of the same inheritance
- the house is your main home for six years after you receive the inheritance. (This does not apply if you are over 65.)
More details here
3. Parents taking an absolute inheritance (full ownership ) from a child have a Group A threshold. However, if the child took a non-exempt gift or inheritance from either parent in the previous five years, any inheritance taken by a parent from that child is exempt.
- Example :Philip receives a gift of £10,000 from his mother in 1999. Philip dies in 2002 and leaves his entire estate i.e. £1,000,000 to his father. The inheritance taken by the father is exempt.
Payment of CAT : If you have received a gift or inheritance, then you are responsible for paying any Capital Acquisitions Tax that is due.
If you are not resident in Ireland, you must get an agent who is resident in Ireland, such as a solicitor, to take responsibility for the payment of CAT.
All gifts and inheritances with a valuation date in the 12-month period ending on the 31 August must be paid and filed by 31st October of that year.
Lifetime Thresholds: You pay CAT on the total of all the gifts or inheritances that you have received throughout your lifetime.
To calculate the CAT on the latest benefit or inheritance , you need to add all inheritances or gifts received under the same group threshold from 5 December 1991.
So for example – if a nephew got a €22,500 inheritance in 2002 – then they still have €10,000 of the €32,500 threshold left. Then if the nephew gets a €20,000 inheritance from another uncle in 2020 – the “left over” €10,000 from the first inheritance will apply and the tax will only be charged on €10,000 of the €20,000.
More details here
National CAT Information Unit
City Centre/North City PAYE District
Central Revenue Information Office
Telephone opening hours: 10.00 to 12.30 Monday to Friday
Call – 1890 201 104
UK Inheritance Tax (Figures from 6/4/19)
The rate of inheritance tax in the UK is 40% on anything above a £325,000 threshold .
But – the threshold doubles to £650,000 for a married couple – as long as the first person to die leaves their entire estate to their partner.
If someone owns a home – their tax-free threshold can increase to £475,000 if:
- the home is passed on to children (including adopted, foster or stepchildren) or grandchildren,
- the total estate is worth less than £2 million
(This is doubled to £950,000 for a married couple – as long as the first person to die leaves their entire estate to their partner)
So an example : – someone in the UK passing on a property worth £800,000 to two children. (The deceased parent is the second parent to die and the first parent to die left their entire estate to their spouse)
The total inheritance tax threshold is £950,000 – so there is no inheritance tax bill.
A similar situation in Ireland (see above) on a €800,000 house – would result in an inheritance tax bill of €52,800 in total or €26,400 per child.